Security of payment amendments
The Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2024 clarifies aspects of the trust account framework and reduces the complexity and cost of complying with the framework.
The amendments do not introduce any new requirements, and the framework continues to maintain important protections.
From 1 July 2024, the amendments will support industry by:
- simplifying the definition of a ‘subcontractor beneficiary’ of a trust account (making it easier to understand who must be paid from the trust)
- simplifying the trust record keeping requirements, working with software providers to ensure there are compliant products available and continuing a transitional regulatory approach for the keeping of records until software is readily available
- pausing the requirement for independent account reviews in recognition of the record keeping and software constraints
- removing requirements for mandatory retention trust training
- clarifying that trust account balances are not included in minimum financial requirements reporting
- clarifying the transitional provisions that apply to new phases of the framework.
Subcontractor beneficiary
A subcontractor who is paid from a trust account (the beneficiary of that account) is any contractor who is required to hold a licence or registration to carry out the contracted work.
The amendments also clarify that contractors doing the following types of subcontracted work are beneficiaries:
- earthmoving and excavating
- installing prefabricated buildings, building parts or building components
- the external or internal cleaning of buildings and other works
- site restoration and landscaping activities.
The offsite manufacture, supply and transportation to site of prefabricated buildings, building parts or building components (where the subcontractor is not performing any installation work) is not subcontract work and not protected by a trust account.
Record keeping
Proper accounting records ensure transparency over the administration of trust accounts, and in the event of insolvency, help to understand subcontractors’ entitlement to secured amounts.
The simplified and less prescriptive record keeping requirements are aligned to standard accounting practice and will help to fast-track software solutions to support compliance with the framework.
For each trust, the following records must be kept separately from the business records:
- Trust account ledger that identifies the balance of beneficial interest in the trust and that consists of ledger accounts for each beneficiary, the trustee and the bank.
- Monthly reconciliation statement that ensures the trust ledger accounts balance and that the bank ledger account reconciles to the bank statement for the trust account.
- Copies of the related source documents including contracts, payment claims and schedules, bank statements and trust notices related to the trust.
Software
The department has been working closely with more than 30 digital software providers to clarify record keeping requirements for trust accounts and support the development of software solutions.
A list of software solutions that meet the requirements for various sized businesses will be published on this site to give trustees confidence the products will enable them to comply with record keeping requirements.
It is expected software will progressively become available in the market from September 2024, with the most common software platforms having solutions by early 2025.
Industry is encouraged to consider the best solution based on current systems and business needs. Existing trustees will have time to consider all options and do not need to rely on the earliest available solution.
Account reviews
Until suitable software is widely available, trustees will not be required to engage an auditor to carry out an account review report. This amendment supports the industry to adapt to the new record keeping and software requirements over a longer period.
The QBCC will continue its monitoring and auditing role until independent account reviews are again required in July 2025.
Training
Training is important to ensure industry is aware and ready to comply with trust account requirements.
Industry has the flexibility to choose from a range of training and resources provided by industry groups and the QBCC that support awareness and compliance.
Minimum financial requirements
Read more information about minimum financial requirements.
Transitional provisions
For new phases of the framework, the amendments clarify that when a change to a contract occurs, the eligibility for a project trust account remains the same as what was in force at the time of entering the contract.
Only substantial changes of 30% or more to the contract price or eligible work will trigger a requirement to have a trust account for a project.
When cash retentions are withheld, whether before or after new phases of the framework start, those retention amounts will need to be placed in a retention trust account.